Fannie Mae 2004 Annual Report Download - page 229

Estimated Annual Pension Benefits
Estimated annual benefits payable under our combined plans upon retirement for the covered executives,
assuming full vesting at age 60 and that our corporate performance caused the participants’ non-salary taxable
compensation to equal or exceed 50% of annual base salary, were as follows as of December 31, 2004:
Mr. Mudd (50% pension benefit), $637,500; Mr. Levin (40% pension benefit), $355,350; Ms. St. John (40%
pension benefit), $298,110; Mr. Williams (40% pension benefit), $298,110. Under his current employment
agreement, which did not go into effect until 2005, Mr. Mudd’s benefits under the Executive Pension Plan will
take into account his non-salary taxable compensation in an amount up to 100% of his annual base salary,
rather than 50%. As of December 31, 2005, Mr. Mudd’s estimated annual benefits payable upon retirement
under our combined retirement plans, assuming full vesting at age 60 and that our corporate performance
caused his non-taxable compensation to equal or exceed 100% of his annual base salary, was $950,000.
Mr. Raines’ actual annual benefit upon retirement was $1,313,722. Mr. Donilon’s annual benefit upon reaching
age 55 will be $140,023. As discussed below under “Employment Agreement with Franklin Raines, Former
Chairman and Chief Executive Officer,” our Board of Directors has not made a final determination about the
amounts to be paid, if any, to participants in certain PSP cycles, which may result in a related adjustment to
Mr. Raines’ annual pension benefits.
Employment Arrangements
The employment contracts, termination of employment and change-in-control arrangements that are currently
in place for our covered executives are described below.
Severance Program
On March 10, 2005, our Board of Directors approved a severance program that provides guidelines regarding
the severance benefits that management level employees, including executive officers, may receive if their
employment with us is terminated as a result of corporate restructuring, reorganization, consolidation, staff
reduction, or other similar circumstances, and only where there are no performance related issues, and the
termination has not been for cause. Eligible participants in the program receive a severance payment of one
year’s salary plus two to four weeks’ salary (three to four weeks’ salary in the case of executive officers) for
each year of service with us up to a maximum of one and a half years’ salary. Participants terminated after the
first quarter of the fiscal year receive a pro rata payout of their annual cash incentive award target for that
year, adjusted for corporate performance. Consistent with the terms of our stock compensation plans, the
vesting of options scheduled to vest within 12 months of termination is accelerated and the post-termination
exercise period of options is extended to the earlier of the option expiration date or 12 months following the
termination of employment. Restricted stock and restricted stock unit awards granted under the Stock
Compensation Plan of 2003 and vesting within 12 months of termination are subject to accelerated vesting,
and unpaid performance shares for completed cycles are paid out. As provided under the terms of our stock
compensation plans, participants in the severance program who have attained a certain age and service will
receive additional accelerated vesting of their restricted stock and restricted stock units and options, in addition
to the full option exercise period. Participants are required to execute a separation agreement to receive these
benefits containing, where permitted, a one-year non-compete clause. The program also provides for outplace-
ment services and continued access to our medical and dental plans for up to five years, with the first
18 months’ premiums to remain at a level no higher than they would be if the participant were still an active
employee. Employee eligibility for the program is determined by the Chairman of the Board, our highest
ranking officer, or a designee of either. In addition, OFHEO’s approval must be received prior to the program
being offered to any OFHEO-designated executive officer. The program, which we described in a Form 8-K
filed on March 11, 2005, is scheduled to expire on December 31, 2006 and will be replaced with a program
that will not apply to our executive officers.
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